This invention relates generally to merchandising coupons, and more particularly to redeemable coupons adapted to be processed automatically by a universal process code supermarket system.
As noted by the Progressive Grocer, the Magazine of Super Marketing (November 1974), in an article entitled "What's Behind the Coupon Boom," it is expected that by the end of 1974 at least 50 billion merchandising coupons will have been printed and distributed. Even if only 10 percent of these coupons are redeemed, the total cost of supporting all coupons in 1974 is estimated to run in excess of 500 million dollars.
A merchandising coupon is often referred to as a "cents-off" certificate, for the holder of the coupon, when he purchases a given product from the retailer, is given a specified discount on this product. Such coupons fall into two basic classes--those printed and put into distribution by manufacturers directly, and those which retailers print for use in their stores.
The great majority of merchandising coupons are authorized by the manufacturer of the product so that the manufacturer is required to pay the face value of each coupon redeemed, plus certain handling charges. For example, the Coca-Cola Company, in 1972, ran ads which included a coupon offer 15.cent. off towards the purchase of a carton of eight Coca-Cola bottles. The retailer who accepted this coupon gave the purchaser of the carton a 15.cent. reduction on the market price thereof. The retailer was then entitled to recover from the manufacturer this 15.cent. discount, plus a few cents for handling costs.
While in some instances coupons accepted by the retailer are redeemed by sending them directly back to the company making the product, most coupons first go through a clearing house. There are various kinds of clearing house operations. In one type, the clearing house immediately pays the retailer cash for the estimated value of the coupons, the difference between the estimated and actual amount being later credited.
After the coupons have been sorted according to manufacturers and denominations, they are shipped by the clearing house to the respective manufacturers who then invoice the money payable to the clearing house. The handling by the clearing house of any shipment of coupons by the retailer usually involves invoicing between 200 to 300 manufacturers. This applies whether the original package has 1000 coupons in it or 100,000 coupons.
Typical clearing house operations add considerably to the cost of processing merchandising coupons. But an even more serious problem is that of misredemption. This has many facets, for in quite a number of cases, it is the consumer who expects a cooperative grocer to accept coupons without purchasing the item to which the coupon is applicable, while in other instances it is the check-out clerk who brings coupons to work, puts then in his cash drawer, and takes cash out.
In some cases it may be the local charitable group that collects coupons and redeems then without the required purchases. Also responsible for misredemption is the retail store manager who pumps substantial quantities of coupons into the redemption stream to reduce his "shrink." According to the above-cited article in the Progressive Grocer, misredemptions have risen to an almost ridiculous proportion--20% to 30% for manufacturers' coupons and still higher for those coupons distributed by stores.
While various schemes have been proposed to reduce misredemption losses, such as improved auditing to ensure that clearing houses adhere to strict criteria, and procedures requiring proof of performance by retailers, they have not significantly cut down misredemptions. As reported recently in The New York Times, "misredemption and store-level larceny of cents-off coupons. . .has been estimated at 100 dollar million a year." Ultimately, it is the consumer that foots the bill for multi-million dollar coupon cheating, in that a manufacturer who pays for misredeemed coupons, in order to stay profitable, tends to pass the cost thereof to the consumer by way of higher prices.
Another difficulty experienced with standard merchandising coupons is that they are not compatible with modern supermarket computerized check-out systems which utilize the universal product code (UPC). To appreciate this difficulty, one must bear in mind that in less than fifty years, the grocery industry has evolved from one characterized by small neighborhood stores to an industrial giant with many supermarkets, and that the variety of foods and household goods now available to the consumer in many supermarkets has grown from less than 3,000 items in 1946 to over 8,000 items.
The UPC system is designed to cope not only with the problem of efficiently and accurate handling the enormous number of items sold in a modern supermarket, but also with the matter of pricing these items. In this system, instead of marking each item of merchandise with its selling price and revising the marking on the box or container every time a price change is made, the item only carries a symbol in the form of code indicia. At the check-out counter, the symbols appearing on the items purchased by the consumer are examined by an optical scanner whose output signal identifies each item as it is pulled across the scanner. The signal is sent to a terminal that automatically retrieves the item's name and price from a memory bank which is readily updated.
The terminal then displays a description of the item and its price, and it performs all of the calculations necessary for tax and change. The terminal prints a customer receipt listing and identifying all of the items purchased, giving the prices of items and the total amount to be paid.
Thus personnel at the check-out counter are relieved of the need to read the price appearing on the item and are not required with the UPC marked items to operate the keyboard on a register to enter the price of the items purchased, for these functions are carried out automatically by the system. But when the customer presents to a clerk at the check-out counter a "cents-off" coupon, then the existing UPC system is incapable of coping automatically with this transaction.
It is for this reason that existing UPC systems, such as the IBM 3660 supermarket system, are provided with a manually-operated digital keyboard functioning in conjunction with a mode keyboard. On the mode keyboard, separate keys exist for food stamps, refunds and other special situations, as well as for store merchandising coupons and manufacturers' merchandising coupons.
When a customer presents a manufacturer "cents-off" coupon, the clerk has to press the manufacturer's coupon key on the mode keyboard, after which he is required to key in the amount of the discount on the digital keyboard, so that a proper discount is accorded to the customer by the terminal. The discount is printed at the terminal and appears on the receipt.
This procedure for merchandising coupons is obviously time-consuming and subject to human error, and since, as explained previously, the current volume of merchandising coupons being traded is enormous, the productivity of the UPC system is materially impaired by the need to manually process such coupons. Moreover, the problem of misredemption is not alleviated by existing UPC systems, for the system honors these coupons, whether or not a purchase is made.